Google launched interest-based advertising  in beta in 2009, making it available to all AdWords advertisers in June 2011. How it works is Google analyzes each time a user visits an AdSense partner website, along with data from third-party companies, and serves up contextually relevant ads related to that user’s category interest, even when they are on websites completely unrelated to that category. In addition, Google uses this data to infer the user’s gender and age category, but this data has limitations, as Google will likely assume you are a female if visiting a site whose demo is primarily female.
Sound a little like Big Brother? The good news is Google offers full customization and a permanent opt-out feature of interest ads. They also offer transparency into their ads, labeling most ads provided by Google on the AdSense partner network as well as YouTube. You can click on the labels to get more info about how Google is serving the ads and the info used to show you ads. In addition, Google makes the point that all personal information is protected and not collected or shared with any third parties.
The interest-based marketing tool, available under the ‘Audiences’ tab in AdWords, allows advertisers to target users according to their browsing behavior vs. targeting ads to specific topic pages. This tool has the potential to improve campaign performance and ROI for advertisers on the Display Network by targeting an interested audience, which is often a challenge on the Display Network. For instance, serving up a mortgage ad to a user who is on a health & beauty site, but has previously visited real estate sites adds another opportunity to capture an interested audience aside from Topic, Keyword, and Managed Placement targeted ads, which can limit your ads to displaying only to users visiting sites related to that category.
Some benefits of interest campaigns include: increasing brand awareness and traffic, extending the reach of existing Display campaigns, and having the ability to customize ads based on specific interests.
If you are curious about the interests and demographic Google associates with your cookie and how they determine which ads to show you, or would like to add/remove categories so the ads are more to your liking, or completely opt out, you can do so here: http://www.google.com/ads/preferences/ .